There is ample evidence documenting that persons with severe mental illness (SMI) are at increased risk for exposure to trauma and the development of posttraumatic stress disorder (PTSD). However, despite research showing that trauma and PTSD are related to worse functioning and a more severe course of SMI, no standardized interventions have been empirically validated for the treatment of PTSD in this population. The proposed research will be a randomized controlled trial of an individual cognitive-behavior therapy (CBT) program for PTSD designed for clients with SMI. The CBT intervention is 12-16 weeks long, has been manualized, and a pilot study supports its feasibility and suggests clinical benefits. A total of 88 clients with SMI (44 with major affective disorders, 44 with schizophrenia or schizoaffective disorder) and PTSD will be randomly assigned to either CBT or treatment as usual (TAU), with assessments conducted at baseline, posttreatment, and 3- and 6-month follow-ups. Primary hypotheses will focus on evaluating whether CBT is superior to TAU in improving PTSD diagnoses and symptoms, quality of life, self-perceived health, knowledge of PTSD, and distorted perceptions of the world. Secondary analyses will explore whether changes in PTSD are associated with improved outcomes for clients with SMI, as suggested by our interactive model of trauma, PTSD, and course of SMI. If our CBT program is effective at improving PTSD and associated outcomes, clinicians will have a valuable new tool for treating this common and distressing comorbid disorder in the SMI population, and potentially for improving the course of SMI.